Chapter 1
How can your portfolio change as fast as your consumer?
To sustain a relevant market presence, companies need to continually reshape their portfolios and challenge their assumptions about scale.
The most important success driver in consumer products today is relevance. But relevance is harder to sustain when consumer needs, expectations, and behaviors are increasingly volatile. In all the scenarios we modeled across our FutureConsumer.Now program, this challenge only becomes more difficult. To address it, companies need to change the way they manage their portfolios.
The trends shaping a new consumer are going to unfold slowly and then suddenly, following exponential growth pathways. This will make the inflection points along a traditional s-curve more acute. Loved and trusted brands can suddenly flatline; new or refreshed propositions can rapidly take off and dominate.
In that kind of environment, companies must have a more dynamic approach to their portfolios. They need to go all-in and commit to growing a brand when they anticipate an opportunity. But at the same time, they need to be brave enough to take the foot off the gas, scaling down or even ditching a brand when the opportunity is not there.
Many brand owners make this kind of assessment already. But it’s a slow and tactical process. It must become rapid and strategic, and it must take into account all the potential impacts to the business, including tax, legal and people considerations.
Creating a dynamic portfolio
Organizations need to apply dynamic scale to their portfolio. That means reviewing their brands and the portfolio as a whole more often (at least twice a year) and with greater rigor. It means anticipating where the consumer is heading, not just reacting to what’s happening in the market. And it means taking bolder action as a result.
Those that get it right will create competitive advantage by making, adjusting and even reversing their brand investments much faster than their rivals can manage. Success is less about achieving as much scale as possible, and more about applying scale in the right way. Can you allocate the optimum level of resources to every brand in your portfolio, and align them all to a shared corporate purpose? Anything else is deadweight that holds the business back.
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Chapter 2
How can you deliver personalization without destroying your margins?
Companies must use scale to make personalization an experience whilst ensuring they can do it profitably.
From choice of product to marketing proposition to mode of delivery, consumers want an experience that feels personalized to their needs, across any channel. The challenge is, how do you deliver it at scale?
There’s a divide emerging between products, services and experiences that feel personalized to the needs of the individual consumer, and generic commodities delivered at massive scale. This is a trend we see accelerating across all of the future consumer scenarios we’ve modeled.
Looking for competitive advantage on the generic side of that line is a losing game. Consumers won’t actively shop for those propositions. At most, they will pick one from a few options curated by their technology platform of choice. At worst, they will fully delegate the purchase to their AI assistant, which won’t care about intangible brand promises. That is a terrifying prospect for brands that are struggling for differentiation and relevance.
To survive the cull of curation, companies must find smarter ways of connecting their brands to consumers. The relationship with them will be the only “channel” that matters.
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Making it all feel personal
The need for product personalization is animating the C-suite, but personalization isn’t just about what you make or offer. It’s also about how you market it to the consumer. Winning propositions are those that feel tailored for them, at the right time for them, in their right place: in the micromoment. It’s also about how you deliver that proposition. That includes every part of the experience, from packaging to channel.
The important nuance is that this is about the feeling of personalization. Large consumer products organizations must make the consumer believe “this is all just for me”. But they need to achieve that in ways that are profitable for a mass market: customization, but not at any cost. How do you better understand the sort of personalization that each consumer actually wants and values?
This is a balance leading companies have been actively experimenting with for a while. Nike has been offering consumers the ability to personalize sneakers for almost 20 years. In 2019, it scaled up the offer considerably. What was originally just a feature on its website became Nike By You, a platform for consumers to co-create merchandise with the business.
Organizations behind the curve on this need to test new propositions now. How could you offer consumers a greater degree of personalization? What innovations could become profitable if you applied scale in a more dynamic way? Have you modeled the impacts on your supply chain and operating model of different levels of personalization across financial, legal and tax perspectives? Smarter use of technology and data will certainly be part of the answer.
Chapter 3
How can you make what consumers want without breaking your supply chain?
To add complexity to what they offer, without increasing cost, companies need to make manufacturing more dynamic.
Consumers increasingly want products that feel more authentic, and they want them to be made and delivered in ways that are more sustainable and traceable. According to a Research and Markets report, the market for clean label ingredients is expected to reach US$47b by 2023, a compound aggregate growth rate of 6.8%. This is putting traditional manufacturing under acute pressure, and it's a trend that will only accelerate.
The scenarios we’ve modeled in our FutureConsumer.Now program anticipate the way consumers will push the demand for instant, factual, trusted information about every aspect of what they buy beyond the limits of what’s possible today.
A lot of consumer products companies are dependent on factories and manufacturing systems that were designed for a different age. They achieve economies of scale by churning out one product all day.
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Making the factory future-fit
Future-fit manufacturing is about smaller runs, quicker turnover, and the ability to meet the demand for much greater variety. To achieve that, factories must be able to scale production up and down quickly. They need to be more automated and more efficient.
In the fashion world it can take six to nine months from designing a garment to getting it into stores. A disruptive newcomer such as Boohoo can cut that cycle to two weeks. It sells over 27,000 different styles of own-brand clothing, and releases 100 new products every day, but purchases stock in batches of less than 500 items at a time.
There’s a cost to adding complexity to production. A more dynamic application of scale can help you give consumers the variety they want, at a price point they find attractive. Levi’s, for example, has transformed its supply chain to enable efficient speed to market and personalization. Investment in robotics has automated denim production and reduced the number of steps required to finish a pair of jeans from up to 24 to just 3. One of its robots can perform up to 12 minutes of manual work in just 90 seconds.
Chapter 4
How can you profit from applying scale without the cost of owning it?
To pivot their operations at the speed required, companies need more dynamic ways of accessing capabilities.
Many large consumer products companies are pulling services back in-house because they feel they have to own their related processes more closely, as that's the only way to become more responsive to the changing consumer.
But the challenge isn’t about owning scale, it's about putting the consumer at the center of your strategy and creating an operating model that enables the organization to apply scale dynamically. For example, Airbnb doesn’t own properties; it connects the consumer to an ecosystem of providers.
Across the future consumer scenarios we’ve modeled, it takes a complex ecosystem of organizations working together to win the consumer. These ecosystems are always led by one dominant player – the ecosystem orchestrator. It’s their role to coordinate a fragmented network of partners and suppliers, accessing and deploying scale in a dynamic way, as and when it gives them a competitive advantage. Could you play that role in your categories?
Buy, build or partner?
Three key factors can help you decide whether to build, buy or partner to get the scale you need: Does the capability differentiate? How fast do you need to move? Are there existing skills you can build on? Long-term answers must also be informed by your purpose. When purpose is closely aligned, partnership is an option. If not, a transactional relationship is likely to be more effective.
Closer partnership is not always the right option. Even so, you can still make sure that integrated, outsourced or shared services are not standard, generic services. With the right technology, you can build greater flexibility into most processes. Dynamic scale can let you focus on the business outcome you want, without having to control how it is achieved. So, have you got the balance right?
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The chart above is a quick and simple way to sense-check your choices and identify the need for action.
A rigid business can’t serve a fluid consumer
Success in the next wave of change is about prioritizing the need to give consumers what they want, then delivering that proposition in a way that seeks to optimize – but not necessarily maximize – scale. That means being agile and intimate where that's what the consumer values, and using scale efficiently where personalization isn’t necessary or profitable.
We’ve suggested some key implications in this article, and some actions to address them, but they are just part of the challenge. Greater change is to come, and it will hit different organizations, categories and brands at different speeds. The right response is not a one-off transformation. The aim is to become an organization that constantly learns, adapts, and scales up and down in a dynamic way, so it generates and captures maximum value as it moves forward and grows.
The key to that sustained transformation is to take a future-back approach. Understand what the future consumer will need and value, and identify the areas of your current cost and scale model that will be critical or irrelevant. Then ask two questions. What capabilities do you have today that you must protect and strengthen? Where do you need to let go?
Summary
In an age of rapidly changing consumer needs, businesses need to be able to constantly adapt and transform their operations to offer the right proposition, in the right place at the right micromoment. That means leveraging efficiencies of production and supply chain scale when delivering a commoditized offer, but reducing the baggage of scale when seeking to offer a more reactive and personalized choice for the consumer. Applying such extreme dynamism to the scale of your operation demands a new approach that is driven by regular portfolio review, smart factories and new forms of alliances or ecosystems.
